I get a bunch of IMs/emails these days from poker players asking me how I got into finance, etc. While the entire story is one I don't think I'll ever share on this blog, I'll say that poker and finance are similar in many respects. Speaking from extremely limited experience, I think, at the very least, a poker player who is in the top %1 of players should have an accumulated knowledge base that should give them advantages over other peers entering finance who have not had that poker experience. I know I am able to grasp certain situations in finance more easily than I would be had I never studied poker. The two fields are easily analogized, but at the same time, are very different. Another Harvard grad who is doing very well in finance was a gifted musician when he was young. He told me that when people meet him, they say things like: "oh makes sense you are doing well, music and math, same thing, etc." He laughs these comments off because you might as well compare ironing shirts to finance. In fact, if you thought about it long enough, I'm sure you could come up with similarities. Either way, I am very curious to see what happens 10 years from now in finance, now that poker is so wildly popular and accepted. I am curious to see whether some of the more successful people will have poker in their backgrounds. One thing that's difficult is the people who would have the greatest chance for success are making so much money at such a young age that it will be hard for them to enter finance at a low level. I admire Jason Strasser for choosing to go work as an analyst at Morgan Stanley making in a year less than he made some months in poker. I have no doubt he'll do very well in the long run, better than he would as a poker player, but it's going to take years for him to get there, and most poker players wouldn't eat those years. In fact, there are many players I know who I would not recommend to be in finance, based on their personalities and the way they approach the game, life, etc. Besides Jason, if I had to pick one person who I thought would be great in finance it would be CTS (Cole). The way he thinks about poker, the way he analyzes and critiques his own game, all would translate extremely well.

I haven't been playing much poker at all lately, but I'm eager to get back into it and will post some hands soon. In the meantime, a friend in finance asked me to write up a few thoughts about the similarities between the two fields, and what I wrote him is below. He does pretty well for himself and is a smart guy, and he told me to save what I wrote, that I would use it in the future. Someone asked me when I thought my poker skills would start "kicking in"--believe me, I can't wait.

Poker v. Finance (some of this taken from a previous blog)

Here are some thoughts:

1. A big misconception about poker is that is a math game. While it's important to have a good grasp of numbers, as well as be able to estimate quickly, you can achieve high levels of success without ever delving deep into the underlying mathematics. Particularly in no-limit, the math is relatively straightforward, and there are fewer compounding problems then there might be in limit hold 'em, for example. Similarly, there are many fields in finance which people think are incredibly mathematically complex (stat arb) for instance, which aren't actually that complicated when broken down. It's not rocket surgery, but it's logic.

Poker is, in its essence, a logic game. It relies on history (memory), anticipation, calculation, thinking through a range of possible outcomes based on imperfect information (this might be the most important), and conviction. It also requires superior personal management. Chip Reese once said that what he felt defined a great poker player was to be able to play well when losing. It's so easy to think clearly when winning, but have a few losing sessions in a row, or lose for a month or three months straight, and then it becomes that much more difficult to play well and manage your emotions. To be successful at poker, and theoretically finance, you need to be able to have a strong memory, and intuition developed from thousands of hours of experience and analysis that allows you to make strategic decisions within a logical framework.

However, many breakthroughs in poker coming over the last two years have been from the math/game-theoreticians, and, and while poker is along way off from being solved by computers, some of the freshest insights will come from math/computer programming, but for now there is still so much room to be successful without relying exclusively on math/models (similar to finance).

2. Poker and winrates. The theoretically achievable winrates/swings in poker are very similar to finance. For example, a winning poker player wins maybe around 52% of his sessions. A superior poker player maybe wins 60% at the very max. A trader who trades every day might win at approximately the same win rates if a day=session. Playing poker teaches you about variance, about not being results-oriented (this is a logical leap most people outside finance/poker don't understand), viewing things from a long-term perspective, and about managing capital (for example, risking more than 5-10% of your bankroll in any one session is a recipe for disaster--however, it's appropriate to take big risks, say if your edge is huge--if I played in a game with terrible players, I might risk more than 5-10% of my capital). So it teaches you naturally about capital management and appropriate risk taking in order to achieve the greatest chance for long-term success.

Below is an old blog entry where I put my thoughts on how it relates to finance in bold.

Here is a blog entry I wrote 7 months ago about what it takes to be good in poker/improve: I will post thoughts about how this relates to finance in bold.

This content of this entry stems from a conversation I had today with a friend from law school. Basically, I had played some poker before the start of law school, but did not get really serious until I was in law school. A bunch of the first year law students had a mutual interest in poker (we started a poker mailing list) and I remember a friend of mine and I taught a few of the people in our section how to play one night (that was fun), holding a mini-tournament. There were a bunch of people who I would say were relatively equal in skill to me but I seemed to improve more than them. Obviously, putting in time is necessary to get better at anything, but I also felt I had certain things going for me that allowed me to improve so rapidly.

My friend thought I had a "process" that he found impressive. Here is what he said from observing me.

1. I don't hide my errors. In finance, your p/l is staring you right in the face, same as in poker. you are forced to recognize when you lose, and the better traders/poker players will analyze by directly confronting their losses and their wins with an objective analysis process.
2. I focus on constant improvement. You cannot rest on your laurels, every day is a new sessions, a new experience, a new chance to learn. The people in finance who don't focus on constant improvement/development will not survive.
3. I have solid records.

I think all 3 of those are true. But I added some adjustments/amendments to what he thought, and I think the things I list will be good things to focus on if you are working on improving as a player. I cannot speak for anyone else, but the following "principles" work for me. Also notice how absolutely interlinked these three guiding principles are.

1. Never think you know the best way to play a hand. This is akin to thinking you always know the best strategy or possible trade in given scenario. There are many smart people out there who are thinking about the same trade, it's really important to focus on listening to others/figuring out what they do that makes them successful/being humble enough to accept criticism to be able to improve.

Even if I won the hand, if there was another way to play the hand I would really dissect the hand in my mind and find ways I could have played it better given the specific circumstances surrounding the hand (opponent, position, stack sizes, image, etc.). I would also ask other players what they thought of how I played the hand and whether they could find a better way. Even when I was just playing live, I would keep a journal of hands in a journal and this process helped me forumlate my thoughts and improve. Most people that I've found always say something like: "this was how the hand went down," or "this is how I played the hand," or even "listen to this hand," and then proceed to tell you how they played the hand. They almost never are looking for criticism, and it seems they do very little self-reflection when they win the hand and even when they lose it and get sucked out on. The real truth of the matter is that there is no perfect way to play poker and no perfect way to play any specific hand. You should always be looking for better ways.

2. I am extremely honest with myself and very self-critical. Most people are not self-critical at all. They just assume, "that's what was going to happen."

Most people I know aren't very honest with themselves. If they lose, they blame it on bad beats or running bad. If they win, they assume they played well. I know I am not perfect, and I know there is always room for improvement. You have to be 100% honest with yourself (in your record-keeping, in your self-reflection, in everything pretty much) in order to have the best chance to improve. I also am extremely hard on myself. Most people don't like to think of themselves as being wrong or making mistakes. I assume that I WILL make mistakes, and when I make those mistakes (and especially if I REPEAT those mistakes) I am very hard on myself. Poker is a form of self-mastery, and if you are honest with yourself you'll immediately notice negative patterns that affect your game. I repeat mistakes all the time, but that doesn't mean I didn't try to self-reflect or improve upon those mistakes. However, there are many mistakes that I have corrected, and that is in large part due to my honesty and self-criticism.

3. I am a student. Finance offers an opportunity to learn every single day. Every day new information comes out, needs to be analyzed/processed, every day new ideas are developed, etc.

I really am a student of the game. I post hands, discuss hands, think about hands, read others' hands, and talk with others about the game. I was lucky when I was learning to form a friendship with some great poker players and they have helped my development so much that I am incredibly grateful. If you find someone better than you who happens to be willing to discuss hands with you, reach out and form a friendship with that person, it will benefit you greatly. Friends can also act as a support system when you are unsure about certain aspects of your game, or even help you out with advice on a wide variety of scenarios.

4 (addendum). Get lucky. Applies to finance as well, it helps to be lucky early on in your career.

It goes without saying that almost every great player ran hot at the start of their career or they would not have reached the heights they did. I certainly ran hot when I played 50/38 in 6max.

What do you guys think of these? I'd be curious to hear others' thoughts on these principles.

In keeping with the above rules, here are two things I'd like to work on in the future if I want to be a regular winner at 25/50 (which is my poker goal for now).


1. Do not go off for large amounts of money, simply quit when you are losing. It's so easy to go off for large sums when you are tilting and multi-tabling at 25/50. It can be disastrous to play when you are not in the right frame of mind, and after taking a few beats and losing around 4+ buy ins, it's best to just pack it in for the day and come back the next day or a day or two later and play with a fresh head. Poker is one long session, but managing the little incremental segments of that long session are critical to long term success. This point is especially true for days following big winning days. This is a common pattern I have noticed in myself and the way to correct it is to simply quit whenever you start to feel invincible and start pushing marginal situations too much. Do not risk too big a portion of your capital in one session; do not put yourself in a position where your downside is going to be a big portion of your capital.

2. Practice impeccable game selection. It's really important to fish hunt and play in games where you have at least one big fish playing. At 25/50, to make a game profitable for me now I think I need at least one fish or two marginal regulars. A game with play2kill, stinger, cts, etc. is simply not going to be profitable for me. Trade where you have an edge.

Finally, my personal assistant Julie scanned a ton of pictures that I had lying about, which was a big project, and I found this old gem among them (thanks Julie!). It's probably my favorite picture ever taken of me. I'm not really sure why I like it so much-I think it's just it reminds me of how I felt at the time, like the whole world was mine for the taking, that I could accomplish anything. The expression on my face-it's like I'm contemplating that. It's from my first day of college, in Holworthy Hall in the Harvard Yard. I am sitting in one of the standard-issue chairs before anything has been unpacked. I have a brand new basketball in my hands, I have my watch on, I have a Pirates hat on with the rim bent just so, and I have on brand new shiny metallic silver Air Max 97s. I'm 18 years old and I didn't want to be anywhere else or be anyone else than who I was that very moment.

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